By Diogo Costa
President, Foundation for Economic Education
At Davos, Javier Milei declared Machiavelli dead.
The Argentine president’s speech was an extended argument against what he called a “false dilemma”: the idea that when designing public policy, one must choose between efficiency and justice, between what works and what is right. Milei insisted that free enterprise capitalism must be defended not merely as productive but as just. “Today’s socialists,” he observed, quoting Israel Kirzner, “do not deny the superiority of capitalism in production. They question it for being unjust.”
Milei is largely right. There is a concession that friends of freedom make far too readily. When confronted with socialism’s appeal, they retreat to a familiar line, one that even Thomas Sowell, quoted by Milei, has employed: socialism “sounds very nice” but “always ends badly.” The implication is that socialism possesses some genuine moral nobility—a concern for the poor, a vision of human solidarity, a rejection of greed—while markets are merely a compromise with the flawed reality of human nature.
I have always hated this concession. . because it is false. It gets the intellectual history exactly backwards. And in getting it backwards, it surrenders the moral high ground that classical liberalism has occupied from its very foundations.
To say that socialism is “good in theory but bad in practice” treats practice as something accidental, like an implementation problem, a matter of getting the details right. But what are these practical failures? The knowledge problem. The distortion of incentives. The concentration of power. The politicization of economic life. These are not bugs in an otherwise sound system. They are what the system actually is.
The “practical” problems that appear as obstacles to socialism’s realization are the very mechanisms through which any attempt at socialism must operate. A theory requiring planners to possess knowledge they cannot have, people to ignore the incentives they face, and power to be exercised without abuse is not a good theory poorly implemented. It is a bad theory. In a market society, if your employer or landlord violates your rights, you can appeal to the courts for redress. But if the state is your employer, landlord, educator, and healthcare provider, there is no Archimedean point from which to contest its decisions. Democratic socialism is a contradiction in terms: democracy presupposes organized opposition, which presupposes independent resource bases, which socialism eliminates by definition.
Nevertheless, in the popular imagination, socialism has become synonymous with moral idealism and liberalism with cold calculation. Socialism cares about people while capitalism cares about profit. Socialism has a vision of human dignity while economic liberalism has spreadsheets. The socialist dreams; the economist counts.
This is not merely wrong. It is the precise inversion of the intellectual history. I find this inversion genuinely baffling.
Consider the foundations of modern liberal thought. John Locke grounded political society in natural rights: the inherent dignity of persons that precedes and constrains political authority. Adam Smith, before he wrote about the wealth of nations, wrote about the moral sentiments, arguing that human sociability rests on our capacity for sympathy and our desire for the approval of an impartial spectator. Immanuel Kant gave us the categorical imperative: that we must treat humanity, in our own person and in others, always as an end and never merely as a means.
Those insights are its historical foundations. The entire edifice of natural rights, limited government, and free exchange rests on a moral vision of human beings as dignified, purposive, creative agents whose projects and values deserve respect.
Now consider the foundations of socialist theory… Instead of offering an alternative moral vision, Marx rejected moral discourse altogether. Morality, in the Marxist framework, is “superstructure.” It is ideology produced by material conditions to serve class interests. Justice, rights, dignity: these are bourgeois constructions, tools of the ruling class, veils over exploitation. They have no independent validity. The revolutionary does not appeal to justice; he understands that justice is whatever serves the historical movement toward communism.
I am not constructing a strawman here. This is the explicit theoretical position. Engels mocked “eternal truths” of morality as metaphysical nonsense. Lenin treated ethics as entirely subordinate to the class struggle. The entire tradition is one of moral deflationism, if not outright moral nihilism.
And yet socialism is remembered as the idealistic philosophy, the one that cared about human beings, while economic liberalism is cast as the soulless doctrine of efficiency and accumulation. I have always found remarkable that after all these years, people still associate socialism with morality, when the very basis of socialist theory is denying that morality, as traditionally understood, even exists.
Part of the reason is rhetorical. Socialists spoke constantly of exploitation, alienation, liberation. They employed the language of moral urgency. That this urgency rested on a philosophy denying the independent reality of moral claims was a subtlety lost on most audiences (including many socialists themselves).
But just as important was the classical liberal drift from thick to thin economics. Confident in their moral foundations, economists sometimes neglected to articulate them, focusing instead on demonstrating the efficiency of markets, the productivity of free enterprise, the correlation between economic freedom and prosperity. These are important arguments. But when they become the only arguments, economic liberalism begins to sound like exactly what its critics accuse it of being: an optimization problem dressed up as a political philosophy.
The tragedy is that classical liberals internalized the critique. Too many friends of freedom half-believe that they have traded something noble for something merely effective, that we have chosen prosperity over justice, efficiency over dignity. I see this all the time: the defensive crouch, the apologetic tone, the implicit admission that yes, capitalism may be cold, but at least it works. This is the concession we must refuse.
Milei referenced the economist and historian Deirdre McCloskey. McCloskey has argued that the commercial society emerging after 1800 through the Great Enrichment that lifted billions out of poverty was not a triumph of efficiency over dignity. It was the opposite. It happened precisely because ordinary people began to be accorded dignity. When the projects of common men and women were granted respect, when their experiments and enterprises were permitted rather than crushed, when their consent was treated as meaningful and their creativity as valuable—then, and only then, did the sustained growth that defines modernity become possible.
Dignity and dynamism are not competing values. They are complementary. The recognition of human beings as self-directing agents, as sources of value rather than factors to be optimally arranged, is both the moral foundation of classical liberalism and the engine of its prosperity.
This is what thick economics understands. . .Property rights as recognitions that persons have projects, that their labor and choices matter, that the fruits of their creativity belong to them. Voluntary exchange as a practice of consent, a continuous affirmation that other people’s values and purposes are real and worthy of respect. The entrepreneur. . . not as an algorithm arbitraging price discrepancies, but as a discoverer of possibilities, a creator of options that did not exist before.
Milei is right that the defense of free enterprise must be moral, not merely utilitarian. But we should be clear about what this means. It does not mean that economists must now scramble to find ethical foundations they previously lacked. It means recovering foundations that socialism never possessed and could never possess, because its theoretical commitments preclude them.
We do not defend markets despite their justice. We defend them because of it.
